Commentary on Economics, Information and Human Action

Should ice-making be a regulated utility?

Lynne’s post on early commerce in ice reminded me that ice making has made other appearances in economic history. For example, some U.S. states once required a state license to make and sell ice.

The question of the reasonableness of such licensing requirements reached the Supreme Court in 1932 in New State Ice Co. v. Liebmann. The New State Ice Co. had secured a license from the Oklahoma Corporate Commission to operate an ice-making plant in Oklahoma City. Subsequently Liebmann built his own ice-making plant in the city and began to operate without a state license. New State Ice sued to enjoin Liebmann from operating without a license.

At the time Oklahoma state law said: “the manufacture, sale and distribution of ice is a public business; that no one shall be permitted to manufacture, sell or distribute ice within the state without first having secured a license for that purpose from the commission; that whoever shall engage in such business without obtaining the license shall be guilty of a misdemeanor, punishable by fine not to exceed $25, each day’s violation constituting a separate offense, and that by general order of the commission, a fine not to exceed $500 may be imposed for each violation.”

Stated succinctly, a private corporation here seeks to prevent a competitor from entering the business of making and selling ice. It claims to be endowed with state authority to achieve this exclusion. There is no question now before us of any regulation by the state to protect the consuming public either with respect to conditions of manufacture and distribution or to insure purity of product or to prevent extortion. The control here asserted does not protect against monopoly, but tends to foster it. The aim is not to encourage competition, but to prevent it; not to regulate the business, but to preclude persons from engaging in it….

The court affirmed a lower court ruling against the state law:

The principle is imbedded in our constitutional system that there are certain essentials of liberty with which the state is not entitled to dispense … This principle has been applied by this court in many cases. [Citations omitted.] In the case last cited the theory of experimentation in censorship was not permitted to interfere with the fundamental doctrine of the freedom of the press. The opportunity to apply one’s labor and skill in an ordinary occupation with proper regard for all reasonable regulations is no less entitled to protection.

Justice Brandies dissented from the majority, saying “It is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country,” and “Denial of the right to experiment may be fraught with serious consequences to the Nation.”

While I’m a big supporter of the idea of social and economic experimentation, notice here that Oklahoma’s “experiment” with regulating the ice industry was itself a “denial of the right to experiment” by private businesses. Such denials, too, may be fraught with serious consequences.

Ice Jew is one of my heroes. You can’t maintain a pool in Oklahoma, much less commercial ice (and some waste heat application) without a utility belt full of potash, hedge shears, and specialty surfacants. Really good name drop for Jul. 30, there.

Fat Man…are you reccommending a mystery novel -and- scoreboarding competition in local regulation or industry arbitration rather than courts?